UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                   FORM 10-Q

[X]   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 For the Quarterly Period Ended March 31, 1998

[ ]   Transition report pursuant to Section 13 or 15(d) of the
      Securities Exchange Act of 1934 For the transition period from
      __________ to ___________


                        Commission File Number: 0-12254


                      SCIENTIFIC TECHNOLOGIES INCORPORATED
                      ------------------------------------
                                    (Issuer)


          Oregon                                        77-0170363
 -------------------------                ------------------------------
  (State of incorporation)               (I.R.S. Employer Identification Number)


 6550 Dumbarton Circle, Fremont, California                      94555
---------------------------------------------               ----------------
  (Address of principal executive offices)                     (Zip Code)


                               (510) 608-3400
            -----------------------------------------------------
                         (Issuers telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 OR 15(d) of the Securities Exchange Act during the past 12 months (or such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90  days.   
Yes  X   No
   -----   -----


Common stock outstanding as of April 30, 1998 was 9,639,243 shares.

<PAGE>




                         PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                      SCIENTIFIC TECHNOLOGIES INCORPORATED
                      CONDENSED CONSOLIDATED BALANCE SHEET
                     (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                   March 31,    December 31,
                                                   1998         1997
                                                   -----------  -----------
<S>                                                <C>          <C>
                     Assets                        (unaudited)
Current assets:
    Cash and cash equivalents                         $4,103       $4,559
    Short-term investments                             6,926        4,973
    Accounts receivable, net                           7,231        7,474
    Inventories                                        5,269        5,113
    Deferred income taxes                              1,020        1,020
    Other assets                                         407          294
                                                   -----------  -----------
       Total current assets                           24,956       23,433
Property and equipment, net                            2,745        2,686
                                                   -----------  -----------
       Total assets                                  $27,701      $26,119
                                                   ===========  ===========

              Liabilities and Stockholders' Equity
Current liabilities:
    Trade accounts payable                            $1,734       $1,934
    Payable to Parent                                    216          --
    Accrued expenses                                   1,778        1,667
                                                   -----------  -----------
       Total current liabilities                       3,728        3,601
                                                   -----------  -----------

Commitments and contingencies

Stockholders' Equity
    Common stock                                          10           10
    Capital in excess of par value                     5,555        5,532
    Retained earnings                                 18,408       16,976
                                                   -----------  -----------
       Total stockholders' equity                     23,973       22,518
                                                   -----------  -----------
       Total liabilities and stockholders' equity    $27,701      $26,119
                                                   ===========  ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.
<PAGE>






                      SCIENTIFIC TECHNOLOGIES INCORPORATED
                    CONDENSED CONSOLIDATED STATEMENT OF INCOME
                      (In thousands, except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                     Three Months Ended
                                         March 31,
                                    ---------------------
                                    1998       1997
                                    ---------- ----------
<S>                                 <C>        <C>
Sales                                 $11,113    $10,110
Cost of goods sold                      5,386      4,823
                                    ---------- ----------
  Gross profit                          5,727      5,287
                                    ---------- ----------
Operating expenses
  Selling, general and
    administrative                      2,904      2,519
  Research and development                635        827
                                    ---------- ----------
   Total operating expenses             3,539      3,346
                                    ---------- ----------
   Income from operations               2,188      1,941

Interest income, net                      120        111
                                    ---------- ----------
   Income before income taxes           2,308      2,052

Provision for income taxes                877        780
                                    ---------- ----------
        Net income                     $1,431     $1,272
                                    ========== ==========

 Basic net income per common share      $0.15      $0.13
                                    ========== ==========
 Shares used to compute basic
   net income per common share          9,639      9,601
                                    ========== ==========
 Diluted net income per common share    $0.15      $0.13
                                    ========== ==========
 Shares used to compute diluted
   net income per common share          9,835      9,743
                                    ========== ==========
</TABLE>
  The accompanying notes are an integral part of these financial statements.
<PAGE>








                      SCIENTIFIC TECHNOLOGIES INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                               (In thousands)
                                 (unaudited)
<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                           March 31,
                                                      -----------------------
                                                          1998        1997
                                                      ----------- -----------
<S>                                                   <C>         <C>
Cash flows from operating activities
  Net income                                              $1,431      $1,272
  Adjustments to reconcile net income to cash
    provided by operating activities:
    Depreciation and amortization                            232         194

    Changes in assets and liabilities:
      Accounts receivable, net                               243         (14)
      Inventories                                           (156)       (192)
      Payable to Parent                                      216         762
      Trade accounts payable                                (200)       (261)
      Accrued expenses                                       111         312
      Other                                                 (112)        (98)
                                                      ----------- -----------
        Cash flows provided by operating activities        1,765       1,975
                                                      ----------- -----------

Cash flows from investing activities
  Investment in intangibles and fixed assets                (291)       (582)
  Sale (purchase) of short-term investments               (1,953)       (502)
                                                      ----------- -----------
        Cash flows used in investing activities           (2,244)     (1,084)
                                                      ----------- -----------

Cash flows from financing activities
  (Repurchase) issuance of common stock                       23         (19)
                                                      ----------- -----------
        Cash flows used in financing activities               23         (19)
                                                      ----------- -----------
Change in cash and cash equivalents                         (456)        872

Cash and cash equivalents at beginning of period           4,559       2,371
                                                      ----------- -----------
Cash and cash equivalents at end of period                $4,103      $3,243
                                                      =========== ===========

Supplemental disclosure of cash flow information:
  Cash paid to the Parent for income taxes                  $877        $780
                                                      =========== ===========
</TABLE>
  The accompanying notes are an integral part of these financial statements.
<PAGE>

                      SCIENTIFIC TECHNOLOGIES INCORPORATED

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

        The consolidated financial statements as of March 31, 1998 and the 
three months ended March 31, 1998 and 1997 are unaudited. In the opinion 
of management, they reflect all adjustments (consisting only of normal 
recurring adjustments) necessary for a fair statement of the results of 
these periods but may not necessarily be indicative of the results to be 
expected for the full fiscal year. Certain information and footnote 
disclosures normally included in financial statements prepared in 
accordance with generally accepted accounting principles have been 
consolidated or omitted pursuant to the rules and regulations of the 
Securities and Exchange Commission. It is suggested that these 
consolidated financial statements be read in conjunction with the 
financial statements and notes thereto included in Scientific 
Technologies Incorporated's Annual Report to Shareholders on Form 10-K 
for the year ended December 31, 1997.

   1. INVENTORIES

    Inventories consist of the following (in thousands):

                                              March 31,     December 31,
                                                 1998           1997
                                             ------------   ------------
         Finished goods                         $2,029           $1,496
         Work in process                           564              624
         Subassemblies                             794              613
         Raw materials                          $1,882            2,380
                                             ------------   ------------
                                                $5,269           $5,113
                                             ============   ============

2. NET INCOME PER SHARE
        The Company has adopted Statement of Financial Accounting Standards 
No. 128 ("SFAS 128"). SFAS 128 requires presentation of both Basic and 
Diluted income per share on the face of the Statement of Operations. 
Basic income per common share is computed based on the weighted average 
number of shares outstanding during the period. Diluted income per share 
is computed based on the weighted average number of shares outstanding 
during the period plus the weighted average of stock options outstanding 
during the period. In computing diluted net income per common share, the 
average stock price for the period is used in determining the number of 
shares assumed to be repurchased from the proceeds of the stock options.

3. DIVIDEND PAID
        On March 5, 1998, the Company declared a cash dividend of $.045 per 
share on all outstanding shares of its common stock. This dividend was 
paid on April 1, 1998 to shareholders of record on March 20, 1998. 
Approximately 87% of the outstanding common stock of the Company is 
beneficially owned by Scientific Technology Incorporated, a California 
corporation under common control with the Company. Dividends paid to 
Scientific Technology Incorporated were applied to the Payable to Parent 
account. 
<PAGE>


ITEM 2 . MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
--------------------------------------------------------------------------
RESULTS OF OPERATIONS
----------------------

        The following section contains certain forward looking statements based 
on current expectations. Actual results may differ materially. Among the 
factors which could effect actual results are those listed under 
"Business Factors" below and those listed under "Management's Discussion 
and Analysis of Financial Conditions and Results of Operations" in the 
Company's Annual Report on Form 10K  for the year ended December 31, 
1997.

                             Results of Operations
                             ---------------------

        Sales for the three months ended March 31, 1998 increased 10% to 
$11,113,000 from $10,110,000 in the first quarter of 1997. This was 
primarily the result of an overall increase in units shipped.

        Gross margin as a percent of sales remained relatively constant at 
52% during the first quarter of 1998 compared to the comparable 1997 
quarter.

        Selling, general and administrative expenses increased 15% to 
$2,904,000 in the first quarter of 1998 from $2,519,000 in 1997. 
Selling, general and  administrative expenses as a percent of sales 
increased to 26% in the first quarter of 1998 from 25% in the comparable 
1997 quarter. This was the result of increased selling expenses 
associated with the higher levels of revenue and increased investment in 
the marketing infrastructure of the Company.

        Research and development expenses declined 23% to $635,000 in 1998 
from $827,000 in 1997. Research and development expenses were 6% of 
sales for the three months ended March 31, 1998 compared to 8% for the 
comparable 1997 period. This was chiefly the result of lower material 
and supplies usage as well as a reduction in services performed by 
outside contractors. The Company anticipates that it will continue to 
make substantial investments in research and development in subsequent 
quarters.

        Interest income, net increased to $120,000 for the three months 
ended March 31, 1998 compared to $111,000 for the same period in the 
prior year.

        The Company's provision for income taxes was $877,000 for the three 
months ended March 31, 1998 compared to $780,000 for the comparable 1997 
period.

        In light of the significant growth of the Company's operations in 
past years, the Company believes that period to period comparisons of 
its financial results should not be relied upon as an indication of 
future performance.

                        LIQUIDITY AND CAPITAL RESOURCES
                        -------------------------------

        At March 31, 1998 the Company's working capital was $21,228,000, a 
7% increase from the $19,832,000 reported at December 31, 1997. This was 
due to positive cash flows from operations resulting in increased short-
term investments and accounts receivable, and lower accounts payable 
which offset increased payable to Parent and accrued expenses. 

        Available bank borrowings were $2,500,000 at March 31, 1998. The 
Company believes that cash from operations, together with its cash 
resources and available bank borrowings, should be adequate to fund its 
working capital  requirements through at least the remainder of 1998. 

                                BUSINESS FACTORS
                                ----------------

        Because of the variety of factors and uncertainties affecting the 
Company's operating results, past financial performance and historic 
trends may not be a reliable indicator of future performance. These 
factors, as well as other factors affecting the Company's operating 
performance, may result in significant volatility in the Company's 
common stock price. Among the factors which could affect future results:

VARIABILITY OF OPERATING RESULTS
---------------------------------
        The Company has experienced fluctuations in annual and quarterly 
operating results and anticipates that these fluctuations will continue. 
These fluctuations are caused by a number of factors, including the 
level and timing of customer orders, the mix of products sold, 
fluctuations in complementary third party products with which STI 
products are sold and the timing of operating expenditures.

SEASONALITY
------------
        The industrial manufacturing equipment industry can be subject to 
seasonality. This is also true with respect to European markets where 
business activity declines due to vacations taken in the summer months.

COMPETITION
------------
        The market for industrial sensors is highly competitive. Many 
competitors have substantially greater name recognition and technical, 
marketing and financial resources than the Company. Competitive 
pressures could reduce market acceptance of the Company's products and 
result in price reductions and increases in expenses.

RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCT DEVELOPMENT
-------------------------------------------------------
        The Company's future success will depend on its ability to enhance its 
current products, develop new products and respond to emerging industry 
standards, all on a timely and cost-effective basis. The introduction of 
new products also requires the Company to manage the transition from 
older products in order to minimize disruption of customer orders, avoid 
excessive levels of older product inventories and ensure that adequate 
supplies of new products can be delivered to meet customer demands.

DEPENDENCE ON INDIRECT DISTRIBUTION CHANNEL
--------------------------------------------
        A majority of the Company's sales are sold through third party 
distributors, system integrators and original equipment manufacturers. 
These resellers are not required to offer the Company's products 
exclusively and there can be no assurance that a reseller will continue 
to offer the Company's products. 

INTERNATIONAL SALES
-------------------
        The Company's international sales may be disrupted by currency 
fluctuations or other events beyond the Company's control, including 
political or regulatory changes.

PROTECTION AND ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS
----------------------------------------------------------
        The Company relies on a combination of patent, trademark and trade 
secret laws and contractual restrictions to establish and protect 
certain proprietary rights in its products and services. There can be no 
assurance that the Company's patents, trademarks, or contractual 
arrangements or other steps taken by the Company to protect its 
intellectual property will prove sufficient to prevent misappropriation 
of the Company's technology or defer independent third party development 
of similar technologies. Moreover, there can be no assurance that the 
technology licenses granted to the Company from its Parent will continue 
to be available. The loss of any of the Company's proprietary technology 
could require the Company to obtain technology of lower quality or 
performance standards or at greater cost, which could materially 
adversely affect the Company's business, results of operations and 
financial condition. Furthermore, the laws of certain foreign countries 
may not protect the Company's products, services or intellectual 
property rights to the same extent as do the laws of the United States.

<PAGE>
                          PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
        Not Applicable

Item 5. OTHER INFORMATION
        Not Applicable

Item 6. EXHIBITS AND REPORTS ON FORM 8-K. 

(a)  The following documents are filed as a part of this Report:

    Exhibit  3.1 - Articles of Incorporation, as amended, are
                   incorporated by reference to the Registrant's Form
                   10-K for the year ended December 31, 1988,
                   Exhibit 3.1

    Exhibit  3.3 - By-Laws are incorporated by reference to the             
                   Registrant's Form 10-K for the year ended December 
                   31, 1985, Exhibit 3.

    Exhibit  4.1 - 1987 Employee Stock Purchase Plan is incorporated        
                   by reference to the Registrant's Registration            
                   Statement on Form S-8 dated May 13, 1988.

    Exhibit  4.2 - 1987 Stock Option Plan is incorporated by reference 
                   to the Registrant's Registration Statement on Form 
                   S-8 dated May 13, 1988.

    Exhibit 10.1 - Lease agreement dated February 21, 1995 for 6550         
                   Dumbarton Circle, Fremont, California 94555, is 
                   incorporated by reference to the Registrant's Form 
                   10-KSB for the year ended December 31, 1994,             
                   Exhibit 10.4.

    Exhibit 10.2 - Bank agreement dated November 29, 1994 with Bank of 
                   The West is incorporated by reference to the
                   Registrant's Form 10-KSB for the year ended             
                   December 31, 1994, Exhibit 10.3.

    Exhibit 10.3 - Amendment dated May 31, 1997 to Bank Agreement           
                   dated November 29, 1994 is incorporated by           
                   reference to the Registrant's Form 10-K for the      
                   year ended December 31, 1997, Exhibit 10.3.

    Exhibit 10.4 - Lease agreement dated November 21, 1995  is
                   incorporated by reference to the Registrant's Form
                   10-KSB for the year ended December 31, 1995, 
                   Exhibit 10.4.

    Exhibit 10.5 - Agreement dated January 1, 1997 with Scientific  
                   Technology Inc. for the purchase of the level             
                   sensor product line.

    Exhibit 21.1 - Subsidiaries of the Registrant  is incorporated by 
                   reference to the Registrant's Form 10-K for the      
                   year ended December 31, 1997, Exhibit 21.1.

    Exhibit 23.1 - Consent of Independent Accountants is incorporated 
                   by reference to the Registrant's Form 10-K for the 
                   year ended December 31, 1997, Exhibit 23.1.

    Exhibit 24.1 - Power of Attorney is incorporated by reference to        
                   the Registrant's Form 10-K  for the year ended               
                   December 31, 1997, Exhibit 24.1.

    Exhibit 27.0 - Financial Data Schedule.

(b)  No Reports on Form 8-K were filed during the first quarter of 1998.








<PAGE>


                                    SIGNATURES


       Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                            SCIENTIFIC TECHNOLOGIES INCORPORATED
                                            ------------------------------------
                                                        Registrant


Date:  May 12, 1998                                /s/Joseph J. Lazzara
       -----------------                       ---------------------------------
                                                     Joseph J. Lazzara
                                               President and Chief Executive
                                                          Officer
                                                 (Principal Executive and
                                                     Financial officer)







Date:  May 12, 1998                                /s/ Richard O. Faria
       -----------------                     ----------------------------------
                                                     Richard O. Faria
                                                  Vice-President, Finance &
                                                      Administration
                                                (Principal Accounting Officer)